The MIT Media Lab is launching a program to develop and distribute $100 laptops to children around the world who are in need of education and technology. The program will provide laptops to children in developing nations who do not have access to the Internet or education materials, even books. With the idea to issue a laptop to a specific child who is able to take the laptop home and use it with their family, this program will provide a means to educate millions (orders will be for at least 1 million laptops).
Free and/or Open Source Software (FOSS) create a means to provide technology to these children without spending lots of money on a proprietary operating system or office package and still provide a complete computing experience. If this operation were required to spend $199 on MS Windows and $399 on MS Office, the whole endeavor would be dismissed as impossible. I know that there are bulk licenses, but they cannot compete with the free software available. I'm not saying that there is not a place for the MS software though, they do provide a rewarding experience for those who are able to pay for the expensive licenses and who are able to pay for the support required to run these systems.
I applaud the efforts of MIT and I am certain that without the movement of FOSS that opportunities like this would not be available. If this effort is successful and laptops are distributed in mass quantities, the acceptance of Linux and Open Source software around the world will sky-rocket.
How do you compete with an opponent that has no price? I don't know, but MS has enough money they may find a way.